Social impact investment: Why are we here?

In the last two weeks I’ve been at two major social impact investing events, both of which were conducted in the language of investors, and both of which left me actively searching for the perspective of social purpose organisations. There’s a lot of discussion about what social purpose organisations need to do to get investment ready, but where’s the conversation about what investors need to do to get impact ready? SOCAP14 On September 3rd, the second night of the SOCAP conference, I attended an event held by Echoing Green, who support young social entrepreneurs. One of the young entrepreneurs was attending SOCAP.  Four of her friends excitedly asked her what it was like. She said “I don’t know. I’m still trying to figure out if it’s for me. I go to these sessions, but I don’t understand what they’re talking about.” I asked her what the issue was. She said the language and the concepts were so foreign to her that she struggled to find meaning in the proceedings. Only that morning, Sir Ronald Cohen had said, “that’s what impact investment is about: enabling social entrepreneurs whether they’re working through not-for-profits or for-profits, to raise the capital they need in order to improve the lives of others, or the environment”. How did we fail to communicate this to our target market? G8 global report September 16 saw the Australian launch of Impact Investment: The Invisible Heart of Markets, the report of the Social Impact Investment Taskforce set up by the G8 and Delivering on Impact, the local companion report by Impact Investing Australia. Both reports strive to set an agenda for flooding the market with money and organisations to deploy it. Neither outlines the need for finance of social purpose organisations or the difficult journey they face to access it. The Charities Aid Foundation paper Returns Policy? What the next decade holds for social investment is much more considered on this front.

Language and publications

The founder of SOCAP, Kevin Jones, said at one of the sessions “the biggest mistake I made was thinking that everyone saw the world like me”. The literature on social impact investing is almost always funded by investors, written by investors, launched by investors and attracts publicity from financial newspapers. Jed Emerson, Cathy Clark and Ben Thornley held a super fun workshop at SOCAP promoting multilingual leadership (communicating across the sectors) and yet every “expert” provided to assist our groups was an investor. Social Enterprise UK and the Big Lottery Fund recently released the only paper I’ve ever seen about social investment that is written for social enterprises Social Investment Explained. It was written by David Floyd and Nick Temple, both of whom have social enterprise backgrounds, and supported by Dan Gregory, one of the most valuable critical minds in the space. It’s almost shocking to read it and realise how investor-driven every other paper you’ve read has been. A good check as to whether a paper has been written in blind investor-speak, is to look for the words ‘supply’ and ‘demand’ [as per previous blog]. The use of these words on their own assumes that the reader looks at life through a finance lens. In reality a social purpose organisation will think of blood, beds, meals etc. when faced with the words ‘supply’ and ‘demand’. Even investor-centric papers can’t agree on a common meaning. On page 3 of the G8 Social Impact Investment Taskforce report (below), ‘supply’ means investors, while ‘demand’ means organisations seeking money (there’s something about purchasers too, but I don’t understand why). G8 Demand and Supply 1 On page 5 of the report Impact Investing For Everyone by Triodos bank, also for the G8 Social Impact Investment Taskforce, it’s the opposite: ‘demand’ now describes investors and  ‘supply’ is used to describe organisations seeking money (below). G8 Demand and Supply 2 I don’t think one is right and one is wrong. It’s just poor communication. For me, these two words are a red flag, immediately indicating disconnect between the writer and the organisations they are trying to support.

Perspective

Language is vital, but so is the inclusion of perspective. Recently the Aspen Network of Development Entrepreneurs, along with LGT Venture Philanthropy, University of St Gallen and Quintessa Partners published Mapping the Impact Investing Sector in Brazil. To do so, they interviewed 22 impact investors. How many organisations receiving investment and delivering impact? You guessed it – none. The title ‘Mapping Impact Investors in Brazil’ would have been a more appropriate. One UK social enterprise journey has been captured by Robbie Davison, of Liverpool-based social enterprise, Can Cook, who published ‘Does Social Finance Understand Social Need?‘ (the answer was ‘no’) in January 2013 before teaming up with Heap, then working for charity, Tomorrow’s People, to publish ‘Can Social Finance Meet Social Need?‘ in June 2013. [This information gratefully stolen from David Floyd’s brilliant blog.]

Call it out

I challenge everyone involved in promoting and designing social impact investment markets [including myself]: check that every conversation, every publication, every panel has at its heart the genuine perspective of social purpose organisations and the people they serve, and speaks in language they understand. Let’s remember why we’re here.

Update October 2014: The Alternative Commission on Social Investment

Just set up in the UK, the Commission will address 5 key [killer] questions and report on them in February 2015:

  1. What do social sector organisations want?
  2. Can social investment, as currently conceived, meet that need?
  3. What’s social about social investment?
  4. Who are social investors and what do they want?
  5. What can we do to make social investment better?

This is visionary thinking. This is where a social investment market should start.

2 thoughts on “Social impact investment: Why are we here?

  1. I don’t think we’re short of social purpose organisations in Australia and more are being launched every day. Most would love to soak up any excess capital that’s going. If these comments are true, I would assume that if the problem is more that the funding that’s being offered is of a size and type that isn’t suitable, or has terms that mean it’s not worth taking. If we’re serious about meeting the financing needs of social purpose organisations, we might have to ask them what those needs are and provide appropriate capital in response. More on this here: http://www.probonoaustralia.com.au/news/2014/09/social-impact-investing-%E2%80%93-whose-market-anyway

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s